We Have An E-mini Futures Breakout On Our Hands
Carley Garner | Aug 31, 2017 05:08PM ET
The market is pricing in a good payroll number as it reverses pessimism over North Korea.
Late Monday afternoon I was watching a business news station. The panel was discussing the implications of a North Korea missile being fired (they were still trying to confirm the rumor that it had occurred). There was talk of a limit down opening to the E-mini S&P 500 (the news broke during the daily afternoon pause of trading). They were right about sharp selling on the open but the bearish tone was quickly forgotten by tax reform talk. Even a 500-year flood couldn't deter the fiscal policy bulls. By Thursday's close all of this week's bearish headlines had been forgotten.
Treasury Futures Markets
Treasuries are moving higher WITH stocks. This doesn't feel right.
Something doesn't feel right in the Treasury market. Economic news has been positive, stocks have been roaring, bonds and notes are lofty in respect to technical analysis, and the Fed is in the midst of a rate hike campaign. Aside from bullish seasonals, it is hard to come up with a good reason to be bullish the longer-end of the Treasury curve (5-year notes and above).
Also, you've likely been hearing about the flattening yield curve. Yields on longer-dated maturities have dropped this year while the yields on shorter maturities have gone up.
Theory suggests that a flat yield curve is suggesting a sluggish economy going forward because a flattened curve hinders banks profits and their willingness to lend. Also, it is a sign the markets are expecting little growth. After all, if they were expecting robust growth they would expect more premium for holding longer-dated maturities.
There are two sides to the story. Many believe this time is different because the lower rates are the result of manipulative central bank policy, rather than natural market rates. Accordingly, the short end of the curve has slightly normalized while the long end simply hasn't (yet).
In any case, there are some odd things brewing in Treasuries and we have a feeling the 10-year note and 30-year bond are getting toppy. To normalize the curve, either the short-end needs to see lower yields or the long-end needs higher rates. We are leaning toward the latter.
Treasury Futures Market Analysis
- Bond Futures Market Consensus:** We are looking to get bearish on a rally. Support and resistance below are based on the December contract.
- Technical Support:** ZB : 154'07, and 152'13 ZN: 126'10, and 125'19
- Technical Resistance:** ZB: 156'14 and 157'0 ZN: 127'11 and 127'18
Get The News You Want
Stock Index Futures
The E-mini S&P 500 futures contract is making up for lost time.
In our view, it will be difficult to curtail the momentum in the short run. Unless, of course, the payroll report is a nightmare. In the meantime, the charts are pointing toward 2486 and potentially even 2503.
If the payroll report combined with light volume manages to force prices toward 2500, it might be a good place for the bears to consider taking action.
Stock Index Futures Market Ideas
- E-mini S&P Futures Market Consensus:**
The ES has clearly broken above 2460, we suspect the short squeeze and price chasing will put prices into the 2503ish price range. - Technical Support:** 2460, 2423, 2415, and 2404
- Technical Resistance:** 2475, 2486, and 2503
E-mini S&P Futures Day Trading Ideas
These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled.
- ES Day Trade Sell Levels: 2474, 2486, and 2503
- ES Day Trade Buy Levels: 2453, 2441, 2434, 2420, and 2414
Other Commodity Futures And Options Markets
May 5 - Buy August e-mini S&P 2000 puts for 5.75 ($287.50).
June 29 - Sell September euro 118 call near 38 ticks.
July 19 - Sell the December e-mini S&P futures contract near 2462 and sell a 2460 put against it to provide a healthy upside hedge.
July 27 - Roll $1.18 September euro calls into lopsided strangles using 2 of the September $1.20 calls and 1 September $1.145 put.
July 28 - Buy December Copper $2.50 puts for about $200.
August 1 - Buy back September Euro 114.5 put to lock in a small profit, then sell double the quantity of the 116 puts to give our short calls a better hedge.
August 2 - Go long December lean hog future and sell at 59 call against it. The result is a risk buffer down to 56 cents, a profit potential of about $1,400 before transaction costs (unlimited risk below 56).
August 3 - Buy back the October ES 2460 put near 40.00 to lock in a moderate gain and sell the November ES 2460 puts near 50.00 to bring in more premium and create a better hedge ahead of the payroll report.
August 3 - Buy back existing Euro strangle and sell fresh September 121 calls and 116.5 puts for a small credit. This should give the market room to move on the payroll report.
August 8 - Roll short Euro 121 calls into 119.50 calls to rebalance the strangle while locking in a gain on the short 121 calls.
August 8 - Exit covered calls in hogs to take a quick profit ($400 to $500 depending on fill prices).
August 9 - Buy December wheat $5.50 calls for about 5 cents.
August 16 - Buy back the $1.195 September euro calls to lock in a profit, then roll the short $1.165 puts into $1.1550/$1.1900 strangles for even money.
August 16 - Buy the December wheat futures near $4.50 and sell a $4.50 call for about 19 cents.
August 21 - Exit covered put in the ES to lock in a profit of over $1,000 per contract before transaction costs.
August 21 - Buy back euro $1.155 puts to lock in gain, hold short $1.190 calls.
August 22 - Sell December hog 52 puts for 1.30 (or $520).
August 24 - Go long March corn near 3.68 and sell a 3.70 call near 19 cents.
August 28 - Roll half of the September euro 119 calls into October 121.50/1.175 strangles.
August 29 - Roll remaining September euro 119 call into a short November 123 call.
August 30 - Sell November euro 116 put against the 123 call to get back into strangles.
(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, euro, yen and more.)
Carley Garner
DeCarley Trading (a division of Zaner)
Twitter:@carleygarner
info@decarleytrading.com
1-866-790-TRADE(8723)
www.DeCarleyTrading.com
www.HigherProbabilityCommodityTradingBook.com
**There is substantial risk of loss in trading futures and options.** These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in a similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.